BHP in bribery probe over Olympic gifts

Investigators are scrutinising the activities of BHP in the lead-up to and during the 2008 Beijing Olympics.
Photo: Louie Douvis

by
Nick McKenzie | Richard Baker | John Garnaut

BHP Billiton
is under a joint US-Australian investigation for possible bribery over alleged inducements, hospitality or gifts given to foreign officials, including Chinese dignitaries wooed as part of a multimillion-dollar hospitality and sponsorship program for the 2008 Beijing Olympics.

The investigations involve the criminal division of the US Department of Justice and the Australian Federal Police. The company and a small number of its staff or consultants may face the prospect of criminal charges or other serious criminal or civil ­sanctions.

Laws that may be examined in the investigation are the US Foreign Corrupt Practices Act and Australian state or federal corporate and criminal laws, including foreign bribery laws which prohibit any benefit being given to a public official to obtain a business advantage.

In response to a freedom of information request, the US Justice Department stated that it was conducting “law enforcement proceedings" involving BHP. In response to questions, the AFP said it had received a formal referral from US investigators and was working “very closely" with them.

The probes are linked to the mining giant’s activities in several countries before 2009, including China, Australia and at least two other Asian countries, thought to be Cambodia and the ­Philippines.

According to a confidential briefing that federal agents gave an inter­national bribery taskforce last year, the AFP has reviewed US files and discovered“suspicious transactions that had been recorded as legitimate business payments" by the company.

The AFP said in a statement that the BHP allegations had been scrutinised by its recently established Foreign ­Bribery Panel of Experts to ensure they were investigated properly.

A former senior executive close to the company’s Olympic sponsorship bid program defended its legal ­integrity. “There’s a good reason no one from BHP is in jail," the former employee said.

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Until the latest revelations, public knowledge of BHP’s possible exposure to foreign bribery inquiries has been limited to its formal statement to the market in 2010 that it had given the US Securities and Exchange Commission information from an internal probe that “uncovered possible ­violations of applicable anti-corruption laws ­involving interactions with ­government officials’’.

At that time, BHP said it was not exposed to possible breaches in China.

The company declined to respond to specific questions from Fairfax Media sent on Tuesday morning about alleged impropriety linked to the Beijing Olympic Games and activities in Western Australia, citing the need to liaise with the SEC before making public comment.

Investigators are scrutinising the activities of BHP in the lead-up to and during the 2008 Beijing Olympics.

Between 2000 and 2008, the company spent millions on a major Olympics sponsorship deal and a hospitality package.

According to the resumé of one Chinese BHP employee, it involved “more than 170 VIPs including senior government officials and CEOs of Chinese ­minerals/ steel industry" .

Some of these chief executives work for state-owned enterprises, meaning they may be deemed as foreign public officials under Australian or US laws.

A US-based consultant, Jet Set Sports, used by the miner in Beijing, was involved in a bribery scandal in 2002 surrounding the Salt Lake City Winter Olympic Games, in which officials were offered inducements.

BHP also supplied materials to Beijing make the gold, silver and bronze medals.

Part of the US inquiry is understood to relate to how transparently expenditure on hospitality and largesse was recorded internally by the company.

A former senior executive close to the company’s Olympic sponsorship bid program defended its integrity, saying it was run “upside down and backwards through BHP lawyers".

He contrasted BHP’s procedures with that of its main competitor,
Rio Tinto
, which was rocked by the arrest in 2009 and subsequent conviction of four Shanghai employees. “There’s a good reason no one from BHP is in jail," the former employee said.

The former executive said that all expenditure had been approved at the company’s Melbourne headquarters and that the total cost of the Olympic project was less than $100 million.

Another industry source said that BHP had conducted internal investigations into its Beijing program and, as a result, significantly wound back its sponsorship of other sporting events. Among the miner’s activities being examined is a deal in Western Australia.

In a confidential briefing last year with officials from the Organisation for Economic Co-operation and Development’s anti-bribery taskforce, the AFP revealed that its investigators had identified questionable transactions which BHP had disguised as legitimate business transactions.

It is understood that a likely outcome from the US probe could be a negotiated settlement, in which the company might pay large fines and show that it had rectified any internal shortcomings that might have risked law breaches.

BHP has voluntarily disclosed thousands of documents and the results of its own internal inquiries to US investigators, in co-operation likely to lessen any prospective penalty. It is unclear whether the AFP will consider its own prosecution in Australia.

An AFP statement said the agency was “engaged in this [BHP] matter and is working very closely co-ordinating activities with our foreign counterparts and local regulatory agencies".

“Notwithstanding that the AFP does not comment on current operational activities, the AFP has received a referral that relates to the Australian aspects of the US investigation" into BHP.

In reports published several years ago and rejected by BHP, non-government organisations have questioned payments made by the company in connection to now closed projects in the Philippines and Cambodia.

BHP’s dealings in Cambodia were the subject of a report by NGO ­Global Witness in 2008. It detailed reports from the Cambodian press the year before which quoted a local politician describing as “tea money" – a colloquial term for a bribe – the $2.5 million that BHP had paid to a social development fund linked to a Bauxite mining project it later abandoned.

BHP has denied any impropriety in respect of the payment.

Those in breach of Australian anti-bribery laws can be jailed for up to 10 years, while companies can face multimillion-dollar fines.

The US Foreign Corrupt Practices Act has penalties of fines of up to $US2 million and jail terms of up to five years.